European Midday Briefing : Investor Focus Turns to European, U.S. Data

MARKET WRAPS

Stocks:

European stocks traded higher on Thursday as investors looked ahead to U.S. and European economic data.

Investors awaited German inflation data at 1200 GMT to gain insights on the possible path of interest-rate cuts by the European Central Bank.

"We may see more cuts being priced if today's data surprises to the downside," Mizuho said.

Commerzbank Research said "today's CPI figures in Germany and Spain will give important pointers for tomorrow's euro area HICP."

U.S. initial jobless claims and the second estimate of second-quarter gross domestic product, both at 1230 GMT, could help shape investors' views about the Federal Reserve's interest-rate path, Deutsche Bank said.

The claims data will offer a timely indicator on the state of the labor market while the GDP data will include revisions to second-quarter core personal consumption expenditures prices, it said.

U.S. Markets:

Stock futures traded higher and tech stocks steadied after shares of Nvidia fell following its quarterly earnings.

Stocks to Watch

Nvidia posted strong quarterly revenue growth and an upbeat financial outlook. But shares fell as the results highlighted challenges from the increased complexity of Nvidia's newest products, and showed its growth slowing from its blistering pace of the past year. Shares were 4.5% lower premarket.

Salesforce raised its full-year earnings guidance and logged strong second-quarter results. The company said revenue rose 8% to $9.33 billion in its second quarter, beating analysts' expectations. Shares rose 4.8% premarket.

Forex:

The dollar fell as traders waited for U.S. data that could influence the market's interest-rate cut expectations for the Fed.

Jobless claims seem stuck near the 235,000 area as broad job lay-offs are yet to emerge, ING said.

"Yet these should rise at some point and Powell's speech last Friday did sound a little nervous as to the speed with which the labor market was deteriorating," ING said.

Sterling may continue to outperform, particularly against the dollar, if the U.K. government delivers a fiscally neutral spending plan while the Bank of England stays cautious about cutting interest rates, ING said.

There's speculation that the budget in October could bring more than GBP20bn of tax increases worth around 0.7% of GDP, ING said.

"However, this may not represent fiscal tightening since she will be using the money to address the real-terms cut in public spending under the previous Conservative government."

Sterling could rise to $1.3300-$1.3330 in the near-term, ING added.

ING said the Swedish krona could gain some support if the market scales back excessive Riksbank interest-rate cut expectations in September but the risk-sensitive currency is more likely to be driven by external factors.

Bonds:

Short-end eurozone government bond yields have room to fall but euro markets might need to be more patient than their U.S. counterparts, ING said.

"Having said that, a further steepening of the Treasury curve on the back of Federal Reserve [interest rate] cuts will pass through to the Bund curve."

As long as the eurozone's jobs market remains resilient and consequential wage growth strong, markets should be careful about extrapolating an [expected] interest-rate cut by the European Central Bank in September to consecutive meetings, ING said.

Citi Research said government bond supply in the eurozone is set to pick up in September following the seasonal slowdown in August, but the issuance volume is expected to remain below the monthly average forecast for 2024.

Citi forecast eurozone government bond issuance of 95 billion euros in September.

Energy:

Oil prices rose, reversing course after two sessions of losses, having slipped despite supply disruption from Libya, ING said.

The country's output dropped this week by close to half a million barrels of oil a day--not taking into account the loss of output from Sharara oil field earlier this month--as the government of eastern Libya halted production amid a political spat with the internationally-backed western government.

A prolonged shutdown will allow OPEC+ more breathing room to increase supply in the fourth quarter as planned, but a short-lived disruption would make the cartel's decision a lot more difficult, ING said.

OPEC+ will be reluctant to bring additional supply to the market when demand issues still linger, it added.

Metals:

Gold futures rose as the market positioned itself for a raft of U.S. economic data that could give hints as to the size and scope of a September interest-rate cut.

The precious metal has gained after Powell confirmed the "time has come" to ease monetary policy at the Jackson Hole symposium, MUFG said.

With a September rate priced in, the market will now analyze upcoming PCE index data on Friday and initial jobless claims on Sept. 5 to assess the scale of a cut.

Gold is set to rise even higher by the year-end given its role as a geopolitical hedge, imminent Fed rate cuts, unprecedented central bank demand, expanding gold exchange-traded funds and the risk of inflationary U.S. policies post-election, MUFG added.

EMEA HEADLINES

European Spirits Makers Surge After China Pauses Measures Against Brandy Imported From EU

Shares in European spirits makers jumped after China said it would temporarily hold back on dumping measures against brandy imported from the European Union, easing a major concern for investors on the potential impact on sales in a key market.

The decision to put a pause on punitive measures comes despite preliminary findings of an investigation into European wine makers that concluded that brandy imports from the bloc had hurt local competitors, the Chinese commerce ministry said Thursday.

Absolut Vodka Maker Pernod Ricard Expects Challenges in U.S., China to Persist

French distiller Pernod Ricard anticipated a soft first quarter after it posted declining sales and earnings for the last fiscal year, citing a challenging environment in China and further inventory destocking in the U.S.

The company-which houses brands such as Absolut vodka and Ballantine's whisky-said Thursday that it expects sales to return to growth in fiscal 2025, but the first three months would be sluggish.

HSBC wealth chief and COO to depart as Elhedery unveils top team

HSBC's chief operating officer and head of wealth management are stepping down as part of a series of top-level changes by incoming CEO Georges Elhedery.

Nuno Matos, chief executive of HSBC's global wealth and personal banking unit, and group chief operating officer John Hinshaw are set to depart the UK lender as its new chief executive has unveiled his executive team.

GLOBAL NEWS

Asian Chip Stocks Retreat, Following Nvidia Lower

Asian semiconductor stocks broadly retreated on Thursday, tracking U.S. artificial-intelligence chip giant Nvidia's tumble overnight.

Shares of South Korea's SK Hynix, a main supplier of high-bandwidth-memory products for Nvidia's AI accelerators, slumped as much as 6.7%, underperforming the local benchmark Kospi's 0.8% fall. Larger memory-chip maker Samsung Electronics lost as much as 3.8%.

There's a China-Shaped Hole in the Global Economy

China's economy is unusual. Whereas consumers contribute 50% to 75% of gross domestic product in other major economies, in China they account for 40%. Investment, such as in property, infrastructure and factories, and exports provide most of the rest.

Lately, that low consumption has become a headwind to China's growth because property investment, once a major component of demand, has collapsed.

Violent Drug Gangs Bring Mayhem to Western Europe

AMSTERDAM-Organized crime used to be considered a remote threat in much of Western Europe, but ruthless violence by criminal gangs is now rattling the peace in some of the world's safest societies.

Sweden now has Europe's highest gun-homicide rate, and the military is helping police fight street gangs. In Denmark, residents of the commune Christiania shut their famed open-air cannabis market after violent gangs took over. In Belgium, armed security forces have started guarding customs trucks carrying seized cocaine to prevent criminals from stealing it back.

French Authorities Charge Telegram Founder Pavel Durov

PARIS-French judicial authorities brought preliminary charges against Telegram founder Pavel Durov for a host of crimes, including complicity in distributing child pornography, illegal drugs and hacking software on the messaging app-a stunning blow for an entrepreneur who became a hero for internet libertarians over the past decade.

The authorities also charged Durov with refusing to cooperate with investigations into illegal activity on Telegram. Paris prosecutor Laure Beccuau cited "an almost complete absence of response from Telegram to judicial demands."

Special Counsel Unveils New Trump Indictment in Jan. 6 Case

WASHINGTON-Special counsel Jack Smith on Tuesday filed a revised indictment that accuses Donald Trump of trying to undo his 2020 election loss, saying the case remains largely intact even after the Supreme Court's July ruling that former presidents enjoy sweeping immunity for acts they take while in office.

With the new indictment, Trump faces the same four federal offenses he was originally charged with related to a series of events that culminated in the Jan. 6, 2021, attack on the U.S. Capitol. But Smith said the government refashioned the case to conform to the Supreme Court's holding that presidents can't be prosecuted for exercising their core constitutional powers.

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08-29-24 0555ET